Contribution Request - UAE real estate market report June 2016‏

Marginal growth in rents bodes well for Dubai, Abu Dhabi

The real estate market of UAE sailed stably in May 2016 and despite some fluctuations, it managed to post positive figures overall. Apartment rents in the two main emirates, Dubai and Abu Dhabi, exhibited marginal growths in the outgoing month, thought the increase was more pronounced in Dubai.

Dubai’s suburbs continue to attract residents and investors thanks to their affordable prices and rents, as well as rental growth and decent yields. Apartment rental yields in Abu Dhabi returned stronger values than the returns in Dubai, showcasing the strength of the UAE capital’s market.

DUBAI

Compared with April 2016, average apartment rents in Dubai grew 1.57% in May 2016, while average rental yields remained at 5.3%.

Category-wise, the average rent for studio apartments went up to AED 57,000 in May from the AED 56,000 recorded in April, a growth of 2%. The average rental yield for studio units in Dubai was recorded at 7.2%.

Average 1-bedroom apartment rents rose by 1% in May to AED 95,000, offering owners an impressive rental yield of 7%. Average rent for 2-bedroom units remained stable at AED 149,000 on average, while rental returns for the category were calculated at 5.7%. Three-bedroom apartments were rented out for an average of AED 206,000 in May, the value exhibiting a 1% growth in rent over the April 2016 figure. The units returned an average rental yield of 5% in the fifth month of the year.

The average rent for 4+ bedroom apartments, which went down to AED 294,000 in April after a 10% fall in values, regained lost ground in May. The average rent climbed to AED 321,000, bringing much-needed respite to homeowners. Based on search hits on Bayut’s web portal in May 2016, the five most popular localities for renting apartments in Dubai were:

1. Dubai Marina

2. Jumeirah Lakes Towers (JLT)

3. Bur Dubai

4. Downtown Dubai

5. Dubai Silicon Oasis

The top localities for buying apartments in Dubai in May 2016 were:

1. Dubai Marina

2. Jumeirah Lakes Towers (JLT)

3. Downtown Dubai

4. Dubai Sports City

5. Palm Jumeirah

ABU DHABI

Average apartment rents in Abu Dhabi, which lost 0.72% of their value in April 2016, made a comeback in May by registering an almost exact 0.73% growth over the previous months. The average rent in the UAE capital was calculated at AED 137,000 across all categories, while overall rental yields were recorded at 7.2%.

In terms of individual categories, studio units led the pack by offering an impressive 8.1% yield on average. Average rent for the category was recorded at AED 63,000.

In the 1-bedroom category, average rents lost 2% of their value month on month, going down to AED 97,000. However, average rental yields remained attractive at 7.7%. Two-bedroom apartments fetched an average rent of AED 139,000 as the value exhibited no changes in May. The rental yield for this category remained at 7.6%.

Roomier categories like 3-bedroom and 4+ bedroom apartments were being rented out for AED 184,000 and AED 254,000, respectively, in May 2016. In terms of rental returns on investment, 3-bed and 4-bed units yielded 6% and 5%, respectively.

Per Bayut’s findings, Abu Dhabi’s five most popular localities for renting apartments in May were:

1. Al Reem Island

2. Al Raha Beach

3. Al Muroor

4. Khalifa City A

5. Al Khalidiyah

The most popular localities for apartment buying in May 2016 were:

1. Al Reem Island

2. Al Raha Beach

3. Al Reef

4. Saadiyat Island

5. Al Ghadeer

Our Take

As far as real estate activity is concerned, the realty landscape of both Abu Dhabi and Dubai is faring well. Projects launched in the recent months are now being reported to have completely sold out, depicting the interest investors – both domestic and international – have in the two markets.

The UAE government’s commitment to infrastructure spending in both emirates will continue to boost morale in the two markets and help push them forward. The nation’s successful negotiation of the oil price crisis has helped buoy its realty markets, which will continue to see increasing investments in the hospitality and entertainment sectors as we head closer to Expo 2020.